Rajesh (engineer) 02 March 2012

Definition of ni act,interesting

Dear Members/Experts,

In the definition of NI act, it is stated that,

Dishonour of cheque for insufficiency, etc., of funds in theaccount. Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid.either because of the amount of money standing to the credit of .......etc

Please note the under lined and bold letters.

1.What is meant by an account maintained by him , does it meant an existing and a valid bank account?

2.If the account was closed several years before the presentation of cheque to the bank ( assume some one missues the cheque given by trust by putting recent date and presenting it to the bank)does it falls within the scope of the definition of an account maintained by him.Will it attracts NI act?

3.In some circumstances ,if there is no minimum balance for few years the banks will close the account without the knowledge of the account holder.

In such a case cheque dishonour will attracts NI act?

Just for knowledge sharing

Thanks in advance

Rajesh

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9 Replies

DEFENSE ADVOCATE.-firmaction@g (POWER OF DEFENSE IS IMMENSE ) 02 March 2012

Very good reasoning.

On the date when the cheque is issued if the account is not there no offense under NI 138 provisions.

Such cases are dismissed at fag end of trial and than the complainant shout against the legal system and what not.

Another most important part is the cheque must have been bounced from the account maintained by accused. Now in many cases the complainant is not able to produce this evidence. Cheque is bounced but which bank has bounced it. The bank where the cheque was submitted or the bank where the account is there.

It happens because the cheque many times does not go to the original bank due to interconectivity. At other times there is no proper memo only some computerised unsigned slip which has no legal value.

R Trivedi (advocate.dma@gmail.com) 02 March 2012

Pl read the S.118 also, this has certain presumption with respect to date. Moreover the another salinet aspect of S.138 is that the cheuqe should have been issued 6 months prior or validity whichever is earlier, the only barring is PDC, which is difficult to prove. So if you can prove that the cheque was not a PDC and it was issued or lost 6 months before the date of bounce, you are safe. But this can only be done during the trial.

Ideally the court should consider the applicability of S.138 before taking the cognizance, but they do not do it, and the trial proceeds.

P.K.Haridasan (Advocate) 02 March 2012

Worthy message thank you

Shonee Kapoor (Legal Evangelist - TRIPAKSHA) 04 March 2012

Thanks for sharing.

Regards,

Shonee Kapoor

harassed.by.498a@gmail.com

R Trivedi (advocate.dma@gmail.com) 04 March 2012

Actually courts feel that once the cheque is issued, it is issued for the settlement of some debt or liability. So in the starting they do not bother much about the reasons of dishonor..

The main reasons for dishonor could be..

1. Insufficient Funds Related.

2. Stop Payment.

3. Accounts Closed

4. Signature not matching.

Now for Pt#1 & #2 it is well settled and cognizance is taken. Pt# 3 is matter of fact, that is one can issue a PDC and close the account after that. So in this case also court proceeds but accused has a valid defence.

PT#4, the court must not take cognizance under S.138. Signature is prima facie taken as execution of cheque, so if the signature itself is not matching, then S.138 should not be applicable. The holder will have other remedies, certainly not under S.138. But even in this case also courts mechanically pass the summons. It is very clear that trial courts generally do not deny to complainant if cheque and Bank slips are attached along with the complaint. Court should be more careful before initiating the process. Who will and whom to tell, mainly because there is no evidence that courts do not examine.

R Trivedi (advocate.dma@gmail.com) 04 March 2012

I want to add another interesting aspect, which has the capacity to nullify lacs of Blank Cheque related cases..

For the blank cheques even the higher courts have erroneously taken into consideration S.20 of Ni Act (Inchoate Instrument), the fact is, a careful reading of S.20 will clear that this section is not at all applicable to blank cheques. Infact a cheque is not a stamped instrumet at all. So a blank cheque is not a cheque and the holder has no authority to fill any amount, so no case is made out under S.138. Risk of accepting the blank cheque is that of acceptor.

Views on this by learned members will be appreciated.

Shonee Kapoor (Legal Evangelist - TRIPAKSHA) 04 March 2012

Dear Mr. Trivedi,

Both Mumbai HC and Kerala HC has quashed the cases based on these arguments only.

Regards,

Shonee Kapoor

harassed.by.498a@gmail.com

Rajesh (engineer) 06 March 2012

Thanks Mr.Trivedi and other experts,

Few experts have expressed that cheque issued after the closure of account is invalid and it does not attract NI act.

Mr.Trivedi explained that NI acts says cheque should have been issued six months prior or validity, which ever is earlier.Mr.Trivedi also has expressed that the only problem is with PDC which is difficult to proove.

Please look in to the typical situation like this,

1.Account closed in 2008 June by the accused

2.Complaint says account holder has issued PDC/blank cheque in March 2008.He is not aware that the account is closed.

3.Complaint fillup some date in 2012 and presents the cheque to the bank,the Cheque bounced in 2012 January ,please note that account is closed before 4 years.

It looks time between closing of the account (2008 June) and bouncing of cheque (january 2012) is more than 3 years.

Will this situation attracts an offence under NI act?

Will the court proceeds with the case filed by the complaint under NI act / dismiss the case in the initial stage it self ?